Crude oil is being driven by more plotlines than an afternoon soap opera. With upcoming sanctions on Iran, the Fed on pace for gradual interest rate increases, strikes in the North Sea and a big drop in the U.S. oil rig count (which fell by 9 rigs, the biggest drop since May of 201), there is enough drama for both the bulls and the bears.
Snapback after a whack, give a dog a bone, this old man comes rolling home. It looked doomy and gloomy in crude oil for a while as trade war fears and reports of increases in OPEC and Russian oil production weighed on market psyche. Yet, after a report about another drop in supply in the Cushing, Okla., delivery point, and talk that U.S. oil production is not what it was reported to be, the mood quickly shifted.
Crude oil is trying to hold ground after Friday’s fear-based market sell-off. Tariff fears and then talks of global growth fears after a sub-par jobs report, not to mention a rising rig count, sent oil lower. Yet, we also have current strong demand, falling OPEC productions and a possibility of a major reaction by the United States after Syria allegedly crossed the chemical weapons line in the sand.
The crude oil sell-off was just downright crazy. Oil got caught up in trade war fears, tech wreck fears, OPEC/Non-OPEC compliance fears, and a build in Cushing, Okla., oil stocks, as reported by Genscape. Stocks had the worst start to April since 1929, but really the magnitude of this sell off was a big April’s Fools Day joke that just one day late.
Crude oil sold off on tariff fears but rallied back as Saudi Arabia is signaling that they are just crazy about production cuts and want an extension. It's tariff fears versus rising demand and falling supply for oil and it seems that supply and demand have the edge right now.
Well, if you thought that OPEC production cuts were difficult to put in place, it may be even harder to work out of them. The extremely successful OPEC cuts, along with their co-conspirator Russia, will at some point be scaled back but raising oil production may not be as easy as it seems.
Apparently, President Donald Trump knows what a dictator wants. They want to be treated rough. Instead of being coddled and respected, they want to make sure that the guy they are dealing with is as tough as he is, and only then can you gain his respect, or maybe his fear. Instead of starting a nuclear war, President Trump’s tough talk and harsh sanctions has brought Kim Jong-un to the negotiating table.
Crude oil prices got a scare on reports that Gary Cohn, chief economic advisor to President Donald Trump, is resigning, which raised fears that the world is on the brink of an all-out tariff and trade war. Cohn, the former Goldman Sachs banker, is said to be quitting because of his opposition to the steel and aluminum tariffs that President Trump has threatened to put in place.
You can talk about shale oil and rig counts all you want but you must also talk about oil in storage or the lack thereof. My buddy Matt Smith at Clipper Data points out that Saldanha Bay in South Africa is home to one of the world's largest crude storage facilities, and it has seen its supply almost emptied out.
A potential trade war and Russian meddling, not in an election but to try to influence U.S. energy policies, is all the rage in the financial markets today. U.S. stocks plummeted after President Donald Trump slowed the market with the timing of his announcement that he would impose a 25% tariff on steel imports and 10% on aluminum.